The natural world. Looking pretty for 3.5b years.

Ecology for Bankers

Something is up when the US Federal Reserve asks ecologists to help them resolve a banking problem. That is just what happened after the 2008 financial meltdown and collapse of several banks. Understanding how biological systems repair themselves and are restored after catastrophes---natural or human---seems to have much to teach bankers about recovery. This was what the Fed wanted to know. Lordy, lordy, what a remarkable development.

On the surface, the overnight banking system, the electronic nodes of the world-wide-web, and the biological structure of an ecosystem wouldn’t appear very similar. However, as Andrew Zolli describes in his new book, Resilience: Why Things Bounce Back, the parallels between the complex networks embedded in the financial system, the internet, and ecological systems show much similarity.

Resilience presents connections between business, geography, biological, economic, and social systems and offers new thinking on how these diverse systems are mimicked in the real world. Using examples like the link between recent US oil prices and corn riots in Mexico to the government bail-out of the banking system and why it became “clogged” in 2008, the book introduces completely new ideas on the connectivity surrounding us all but little appreciated. “Flipping” is described in economic terms where a banking systems that has been heavily disturbed “flips” and changes forever. A similar situation is well understood by ecologists and is not dissimilar from an ecological “tipping point” in the biological context.

The author explains one example of resilience of a bank impacted by Hurricane Katrina and how it recovered to prosper by using a creative and adaptive strategy to their post-catastrophe lending. The bank showed resilience and recovered to prosper: